increasing life expectancy to push up pension age further from 2022

18/12/2014 15:00

Under the coalition agreement of the present Dutch cabinet, from 2022 onwards the entitlement age for state old-age pension will be linked to the increase in life expectancy. Based on the population forecast published by Statistics Netherlands today, the pension age will be stepped up further from 2022 onwards. In 2060, people will be entitled to state old-age pension when they are 71.5 years.

Elderly people living longer and longer

Elderly people are living to increasing ages. Based on the current state of public health and medical technology, 65 year-olds in the Netherlands can expect to live for another 19.8 years on average. Since the introduction of state old-age pension in 1957, this life expectancy has risen by 5 years. The forecast predicts an increase by another 5 years to 2060. This increase may be a few years larger or smaller, as it is uncertain how life expectancy will continue to develop in the future.In practice, over-65s live longer than their life expectancy, as they still continue to benefit from medical technology beyond the age of 65. People celebrating their 65th birthday this year can therefore expect live another 21.1 years on average.

Pension entitlement age linked to life expectancy

Under current regulations, the age at which Dutch people are entitled to state old-age pension will rise to 67 in 2023. After that, it will rise with any further increase in life expectancy at age 65, in steps of three months at a time. Under the coalition agreement, however, the entitlement age will already be 67 years in 2021, and will be based on life expectancy from 2022 onwards. A bill to provide in this acceleration was introduced in parliament on 17 November. On the basis of Statistics Netherlands’ forecast, this will lead to an extra 3-month rise in pension entitlement age in 2022. This may still change, however, as the entitlement age for 2022 will only be set at the beginning of 2017, based on the forecast at that time. After 2022, the pension age will be raised further every two to three years. By 2060, it will have reached 71.5 years. As future life expectancy cannot be predicted accurately, this may be a few years higher or lower.

More older people in work

As a result of the rising pension age, more and more over-65s will continue to work. At the end of 2014, 34 thousand over-65s are still too young to receive state old-age pension. In 2040, this will have risen to around 0.8 million. The total number of people of working ages (between 20 and pension entitlement age) will rise to an expected 10.2 million in 2040, slightly more than now. If the entitlement age were to remain unchanged, the number would fall by 0.7 million between now and 2040. The fact that the working-age population will not decrease as a result of the increasing entitlement age does not necessarily mean that the same number of people will be available for the labour force. This will depend on whether the age at which people retire will rise at the same rate as the age they are entitled to state old-age pension.In spite of the increasing entitlement age, the number of inhabitants entitled to state old-age pension will increase from 3.0 million now to 3.9 million around 2040. After 2040, a decrease is expected to set in.